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Informist, Wednesday, Oct. 16, 2024

 

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--Sources: Merging compensation cess into GST rates will benefit states 
--Sources: GoM to discuss how to merge compensation cess rate with GST rates 
--Sources: All states suggested merging compensation cess into GST rates 
--Jr finance minister:GoM on GST compensation cess to next meet Nov 2nd week 
--Jr finance minister:Preliminary talks on GST compensation cess at GoM meet

NEW DELHI - At the first meeting of a Group of Ministers on Goods and Services Tax compensation cess on Wednesday, states recommended merging the cess with GST rates once the compensation cess regime ends in March 2026, a source aware of the meeting said.

 

"If the GST compensation cess is merged with GST rates, it will benefit the states, so they are in favour of merging it," the source said. The Group of Ministers will next discuss how the compensation cess can be merged with GST, the source added.

 

Talking to the media after the meeting, Minister of State for Finance Pankaj Chaudhary said that only preliminary talks were held since this was only the group's first meeting. The panel will next meet in the second week of November to hold further discussions, Chaudhary said.

 

During discussions on the merger, states argued that new goods should not be included in the list of luxury, sin, and demerit goods when the compensation cess is merged into GST rates, the source said. To bring states on board to adopt the GST regime in 2017, the Centre had promised to protect 14% revenue growth for states for the first five years by levying a cess on certain luxury and sin items such as tobacco items, motor vehicles, expensive motorcycles, caffeinated beverages and aerated drinks. Originally, the GST compensation cess regime was to be discontinued from June 2022.

 

The GST Council, however, had extended the compensation cess levy till March 2026 to repay the loans taken to meet the shortfall in cess collections during the COVID-19 pandemic. 

 

"The compensation period has ended and if it is to be brought under GST then the items on which the cess exists will have to be restructured," the source said. Earlier in the day, citing finance ministry officials, Informist had exclusively reported that this Group of Ministers will "regroup" and "recategorise" what should be treated as a luxury item and a sin good and the new avatar of the tax – which will replace the compensation cess - will be levied only on these items. 

 

The GST Council in September had set up a Group of Ministers led by Chaudhary to take a call on the future of the compensation cess. The Group of Ministers is expected to submit its report by the end of December.  End

 

Reported by Shubham Rana

Edited by Tanima Banerjee

 

 

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